We personally believe there are too many terms or industry jargon in the startup scene. Just yesterday we wrote an entire piece about crowdsourcing when it was actually about crowdfunding, but the writer misread the editorial brief. This happens a lot.
So we decided to take the term crowdfunding and do a deep dive into it.
What do the terms mean?
The term “crowdsourcing” means collecting goods and services through an open network of internet users. It is a great way to get ideas and content through the power of the masses.
Crowdfunding, on the other hand, is a type of crowdsourcing that enables internet users to collectively fund a project by pre-purchasing the item beforehand. This idea came directly from fundraising which is a way to collect money for non-profit or charity events.
Read how to get funded without giving up equity.
In this relevant content, crowdfunding is most often used by startups or fast-growing businesses as a way to fund their expansion or growth. This is usually in the form of pre-purchasing products or services before they are market-ready. It can also be a way of cultivating a community around your offering. By using the power of the online community, you can also gain useful market insights and access to new customers.
We take a look at this in a Southeast Asian context and what it means for the startup community here.
How it works
There are two main types of crowdfunding according to the accepted explanation.
- The first relies on entrepreneurs preselling their product or services in order to start their business without the need to sacrifice shares or start with a debt. This concept works well because it allows startups to create different levels of rewards based on the amount of the money donors pledge to the campaign.
- The second type is equity-based crowdfunding and it includes sharing company shares depending on how much a backer is ready to invest.
There are other types of crowdfunding to note:
- Software value token, which includes raising money for a campaign where software-based value token is a reward.
- Donation-based crowdfunding allows gathering resources for a charity campaign.
The most popular platforms for crowdfunding
The number of platforms for crowdfunding is increasing every day. Kickstarter is most likely the best-known crowdfunding platform on the internet. The platform supports mostly creative projects, which makes it open for film, music, games, and tech projects. Other similar platforms include Indiegogo. For nonprofit crowdfunding, you can check out Donorbox.
However, this isn’t limited to only technology and creative projects, as alternative crowdfunding platforms like BitofProperty, are starting to gain traction. Recently funded, this Singaporean-based startup offers blockchain enabled property crowdfunding. This investment platform enables anyone to become a property investor.
The impact that crowd-based campaigns have on social and business image across the globe is immense. Through crowdfunding, startups are able to finish their projects faster and cheaper, while focusing their attention on more urgent issues.
Though some that question the quality of crowdsourcing, the fact that so many businesses and individuals rely on community backed projects shines with confidence in the results of such actions.
Last updated 12 October 2021